Opening bounce seen on bank news, Microsoft
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Mon, 22 Sep 2008 13:26:37 GMT |
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By Ellis MnyanduNEW YORK (Reuters) - Stocks headed for bounce at the open on Monday as news that Japan's largest bank planned to buy a stake in Wall Street bank Morgan Stanley tempered worries about the proposed $700 billion financial sector bailout.Mitsubishi UFJ Financial Group <8306.T> said it planned to buy a stake of as much as 20 percent in Morgan Stanley, sparking a surge of more than 11 percent in Morgan Stanley's shares before the bell.Microsoft Corp shares climbed more than 5 percent to $26.45 before the bell after the software maker raised its quarterly dividend and set a $40 billion stock repurchase plan.Even so, investors remained cautious about the likely shape of the proposed $700 billion bailout to mop up hundreds of billions of dollars worth of bad mortgage debt.Investors worried Congress would seek to change the Bush administration's plan, which Treasury Secretary Henry Paulson announced on Friday. The proposal, coupled with earlier bailouts, bankruptcies and arranged mergers, would do nothing short of reshape the U.S. financial landscape."Some skepticism about whether or not the bill is going to be passed the way Paulson wants it to be might be giving the market a bit of a hiccup," said Peter Cardillo, chief market economist at Avalon Partners in New York."Will they add things to it? So that raises the level of skepticism. Secondly, what does it mean for inflation? This could be very inflationary."S&P 500 futures rose 2.90 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures climbed 18 points and Nasdaq 100 futures gained 8 points.Rising oil prices could be another headwind for the market, with U.S. front-month crude up 2.6 percent at $107.30 a barrel as the dollar weakens.In another development, Goldman Sachs and Morgan Stanley, whose shares were pummeled last week, are abandoning their investment bank model of two decades to become bank holding companies. They will have an additional safety net from the Federal Reserve but may not be as profitable as in the past.Officials have said the plan, in which the government will buy soured mortgage-related debt from financial institutions, will cost taxpayers hundreds of billions of dollars.(Editing by Kenneth Barry)
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